Maruti Suzuki to Cut Car Production by 40% in October 2021

Maruti Suzuki to Cut Car Production by 40% in October 2021
by 5paisa Research Team 01/10/2021

In a move that is significant, and also surprising, Maruti Suzuki has decided to cut its production of passenger cars by 40% for the month of October. This decision has been triggered by the tremendous shortage of microchips in the global market. Microchips are intelligent pieces of silicon that enable systematic and computerized processes to run efficiently in equipment.

The decision is rather surprising because the 3 months beginning in October are the peak festive season. Normally, auto companies report nearly 30-35% of their full year sales only during the festive season. The festive season begins with Navaratri and concludes with Christmas shopping towards the end of the year.

Without getting into specific numbers, Maruti announced that it would operate at 60% capacity at its car manufacturing plants. This is actually better than the month of September when Maruti had operated at just 40% of capacity. Microchips demand has surged in the last 2 years and auto companies have struggled to ensure regular supply commitments.

The production at its Haryana plant as well as its outsourcing plant in Gujarat are likely to be adversely impacted by this production cut. Apparently, the problem is not about sales falling but of sales failing to pick up to the extent expected. As a result, Maruti will be selling out of its inventories and the production cut will ensure that demand and supply are matched.

Both the Haryana plant and the Gujarat plant have worked lesser shifts in August due to the microchips shortage. Suzuki Motor Gujarat is wholly owned by Suzuki of Japan and it makes fully built Baleno and Swift cars on behalf of Maruti. The lower production only means that the car manufacturer is not keen on building inventory during the festive season.

However, other car manufacturers are not cutting production. Some of the major auto players in India like Hyundai, Tata Motors and Mahindra & Mahindra are maintaining current levels of output. On the other hand, a number of smaller players like Volkswagen, Skoda and MG Motors are even looking to boost their production cycles during this period.

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